How a credit score is calculated when you apply for a secured loan?

A credit score is simply known to be a 3 digit numeric code, which is calculated by the credit bureaus for determining your creditworthiness. It is also considered to be an essential factor among many when it comes to giving secured loans.The usual credit score lies between 350-900 and the position of your credit score in between does decide your loan approval along with other factors.

It is likely to be known that 750 credit score is the best one and you can get a loan from anywhere based on your requirement easily. Whereas a low credit score will lead you to the loan rejection. But you can choose to go with other alternatives, but may get high-interest rates. There are certain factors which contribute to the calculation of your credit score.

Repayment History:

When you are applying for a loan, it is quite acceptable to check about how you dealt with your previous loans. Your loan and credit card repayment history definitely speak about your capability in loan repayment. When you are irregular with the EMI payments, loan repayments and with regular bills it will affect your credit score. And also make sure that your credit statements and the credit report information do match. A small piece of wrong information can change your credit score drastically and lead to secured personal loan rejection.

Credit Mix:

The ratio of your secured and non-secured loans will be your credit mix. You will be prefered by a lender and have a good credit score if you have multiple kinds of loans. You can maintain a healthy credit mix by having secured, unsecured or credit cards or even by replacing your unsecured loans with the secured loans.

Debt to Income Ratio:

Every lender does check with the debt to income ratio, which is known to be the ration of your income and debt expenses. It will help the lender to determine your loan repayment ability. For instance, if you have an income of 40,000 and you have the monthly EMI’s of 20,000 which include your loans or credit bills. In the end, you will be left with 20,000 for dealing with your regular expenses, which is not a reliable currency number. In this case, the lender will feel insecure about the secured loans UK repayment.

Credit Utilization Ratio:

You might be using your credit card, but make sure you use it in a proper way. Even though you can use the credit card to its limit, but you shouldn’t. Your credit utilization ratio is one of the factors considered by the lenders among many. The ration is of the credit card limit and the total outstanding amount. Lenders will be interested to give a loan to the borrowers with 30% or less than the credit utilization ratio. If the ratio is more than 30% it concludes that the borrower may not be stable with the loan repayment.

These are the few factors considered while calculating your credit score. If you fail to fall in within the factors then you will have a low credit score and it raises the difficulties to get a loan for you.

Short Term Loans UK is for a Specific Short Period to Solve any Financial Crisis. You can easily get out of your Financial Problem and Clear the Loan with ease. There is no burden of high-interest rates in this case